Costs management two years on: how far have we come?

Article

Posted by on

Summary: Two years on from the civil litigation reforms of Lord Justice Jackson, costs management has shown itself to be one of the most major reforms solicitors have had to grapple with. Fitting, then, that Jackson LJ himself chose to review and “confront” costs management in last week’s annual Harbour lecture.

Jackson LJ thinks that in 10 years’ time the legal profession will be wondering what “all the fuss” was about in costs management. His view, echoed by discussions and research carried out before his speech at the annual Harbour lecture, is that clients want visibility of costs and better management of them. Two years on from its introduction, costs management has gone a significant way towards achieving that, but it is clear that there is still some way to go.

What has happened?

Jackson LJ’s reforms, introduced via rule changes and legislation just over two years ago, were aimed at reducing the costs of English litigation while maintaining or even improving access to justice. Heralded at the time as a “big bang” in the legal community, the one reform which has changed daily practice for litigators is costs management: the requirement that early on in a case the parties produce a budget for the whole case up to trial which the court is able to actively manage and which sets a limit on recovery for the winning party.

The benefits of budgeting are obvious and not controversial; an understanding of the “price tag” for a piece of litigation should and does incentivise parties to behave more sensibly and even promotes earlier settlement. Commercial clients running their own businesses will have been surprised that solicitors could have resisted for so long the commercial (and common sense) practice of preparing a budget at the outset of a project and managing and adjusting those budgets as the project developed.

What are the key points?

The solution of costs management was a welcome one but, as always, the devil has been in the detail. Pilot budgeting schemes which were run prior to April 2013 provided some insight into what the issues might be, but implementation went ahead without clear solutions. And two years of costs management in the civil courts at large has thrown up more issues. For example:

  • The act of producing, negotiating and allowing judicial scrutiny of budgets can itself be an expensive process. That frontloading of costs, even in cases which are likely to settle before trial, is problematic for clients. Some argue that lawyers spend more time debating costs than they do on the real legal and commercial issues in the case itself.
  • The courts have been overwhelmed. Jackson LJ cites a particular problem with clinical negligence cases in the QBD where there is up to a 9 month delay in listing costs management conferences. Jackson LJ’s suggested and radical solution is to row back on recent changes to the rules which have made the courts more rather than less likely to make a costs management order. Whilst resourcing pressures on the courts are widely known, it seems a sorry (and ironic) solution to reduce access to a positive reform like budgeting just to rationalise and save the courts’ own resources.
  • Judicial training to date on costs management has been minimal. Whilst Jackson describes plans to improve and increase judicial training on costs management, training to date has been minimal and not even compulsory. That may have contributed to the inconsistent approach to costs management across the judiciary.
  • If a case progresses to detailed assessment, it is difficult to marry up the budget with the final bill of costs. Whilst plans are in train to introduce phased recording of time using “J-Codes” and ultimately to require bills to mirror the phases of a budget, these changes are still years away – a J Codes pilot is mooted for April 2016.

All major legal reforms take time to bed in, but costs management is one which pervades the whole of the litigation process and can have a profound impact on the progress and overall outcome of a case. Jackson LJ claims the legal community has made a “fuss” about budgets which will in time be wondered at. However, unless the very real problems posed by budgeting are addressed satisfactorily, then we may be waiting longer than the 10 years or so which Jackson LJ suggests.

In the meantime, without clear guidance and even change, budgeting could continue to be a lottery for court users. Whilst clients may increasingly be receiving a clear picture on costs from their lawyers, it is high time for the courts to provide a clear and consistent picture to lawyers on how those costs are going to be managed.

Stay informed

Sign up to receive email alerts from our award winning Expert Insights team

Sign up now

See more insights by category

This site uses cookies to help us improve our services and your browsing experience. For further information about cookies, including about how to change your browser settings to no longer accept cookies, please view our privacy policy.